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Russia’s enduring love for fake luxury

This article was originally published in IAM Weekly, and has been republished with permission.

Over $43 billion-worth of counterfeit goods are sold in Russia each year – and this figure is escalating.

It is estimated that approximately 40% of all handbags, apparel and accessories sold in Russia are counterfeits. In 2017 the Federal Customs Service made headlines with the seizure of counterfeit branded Swiss watches estimated to be worth over $200 million.

While some products are locally produced, most are imported from Asia, Bulgaria, Turkey, Poland and other Eastern European countries.

However, not everyone is being duped and many consumers know what they are buying. The target audience for original and fake luxury products differs significantly, and most consumers of fake fashion products know that their items are counterfeit.

The consumer demographic is broad. According to a recent survey, 30% of Russian consumers said that they had bought counterfeit products in the last year; 42% of which were clothes. More purchases were made by women than men. Further, when it comes to luxury goods, counterfeit consumption appears to depend less on income and more on education levels (ie, consumers with a higher level of education tended to buy more).

How the Internet and social media changed everything

Unsurprisingly, the Internet has transformed the counterfeit goods sector by offering greater anonymity and less risk of prosecution for buyers and sellers alike. Gone are the days of lurking in unsavoury markets to purchase fake merchandise; consumers can simply order goods over the Internet and have them delivered to their front doors. Research suggests that the most active consumers of fake goods are young people (ie, aged 18 to 24) and regular internet users.

Social media has exacerbated the issue. Thousands of alluring products can be presented to users on well-known social media platforms and bought with only a few clicks. The most common counterfeit products sold through social media are:

handbags;

branded apparel;

shoes;

watches; and

perfumes.

The number of social media accounts on which branded counterfeits are sold using the Russian language ranges from 6,000 to 10,000, covering more than 17 million subscribers.

A recent study revealed that as many as nine out of 10 websites listed in a Russian search engine were selling counterfeit goods, with most of the contextual advertising stemming from counterfeiters.

Further, many merchants not only sell counterfeited products, but also replicate the trademarks of branded companies in order to pass as official online retailers.

High street versus luxury brands

High street and luxury brands are vulnerable in different ways. Louis Vuitton and similarly prestigious brands are often thought to be the main targets for counterfeiters; but high street brands are equally exposed. Fashion trends create demand that usually exceeds supply, particularly in less mainstream markets such as Russia. Knowing this, counterfeiters quickly introduce high street branded clothing in cities like Moscow. For example, Yeezy Boost trainers and emerging high street brands such as BAPE, Off-White, Supreme, Thrasher and Vetements are widely available in Russia through the Internet, specialised shops and social media, as well as common sale and exchange e-platforms (eg, Avito and AliExpress) and retail outlets. Many of the products sold through these channels are likely to be counterfeit. Retailers seldom shy away from telling consumers that their goods are copies or replicas in the hope that disclosure will shield them from liability.

Winning the fight against counterfeits

The best way to tackle counterfeiters is to have a strong plan, with escalating steps of engagement and cost. Rights holders should try to get a handle on the scope of the problem as follows:

For imported goods, rights holders should identify the country of origin, relevant border points and times of entry.

For locally manufactured goods, they should identify the most likely source of production.

Identify the main distribution networks (eg, high street retailers and markets, e-commerce platforms, social media).

Further, rights holders should determine what investigative and protective tools might be useful as follows:

Using smart software to detect and take down websites selling counterfeit goods.

Determine whether the core trademarks registered with the brand owner in Russia and members of the Eurasian Economic Union.

Determine whether the registered trademarks recorded on the Customs IP Register as a smart pre-emptive measure to block incoming goods.

Determine whether standard demand letters and emails have been prepared.

When reputable social media platforms are involved, rights holders should contact the social media company first and ask it to remove the account. Fortunately, such companies usually collaborate with brand owners as much as possible and take swift measures to block infringing content (usually within three to five days). However, where legal proceedings are required, brand owners have three options:

civil action;

administrative action initiated by Customs or the police; or

criminal proceedings initiated by the police.

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